Federal Reserve officials make ambiguous statements on interest rate cuts, emerging market currencies decline

According to the Zhitong Finance APP, on Wednesday, due to the uncertainty surrounding the interest rate cut signals released by Federal Reserve officials, the US dollar strengthened, and emerging market currencies fell. The MSCI International Index tracking emerging market currencies dropped by 0.2%, with the Hungarian Forint, Czech Koruna, Brazilian Real, and Polish Zloty all declining by at least 0.8%. The Bloomberg Dollar Index rose by 0.6%, while US Treasury yields increased, as San Francisco Fed President Mary Daly stated on Wednesday that further rate cuts may be needed, but the Fed should act cautiously when taking such measures.

Marco Oviedo, a senior strategist at XP Investment Company, stated, "Given the officials' statements, market expectations for the Fed have adjusted. There may be disagreements among members, so the market is uncertain about how this situation will develop in the future, and the current data is still unconvincing."

Oviedo believes this is a typical "risk-off" day. However, he noted that given the world's largest economy has not yet released relevant economic data, this "risk-off" phenomenon seems to be "somewhat restrained." He added, "Currently, it is mainly driven by market sentiment."

Since Federal Reserve Chairman Jerome Powell's speech on Tuesday, the market has been anticipating more clear information regarding the Fed's future policy direction. In this speech, Powell reiterated his view that policymakers may face difficult choices when weighing further rate cuts.

The market is also weighing the remarks of other Fed officials. Fed Governor Michelle Bowman’s comments were relatively dovish—policymakers may be falling behind the curve and need to take decisive action to lower rates as the labor market weakens. In contrast, Atlanta Fed President Raphael Bostic and Chicago Fed President Austan Goolsbee both issued warnings about inflation.

In an interview on Wednesday, US Treasury Secretary Janet Yellen expressed disappointment that Powell had not yet outlined a clear plan for lowering interest rates.

Benito Berber, chief economist for the Americas at Natixis, stated, "The current price movements in the emerging market foreign exchange market seem to fully reflect all the characteristics of a risk-averse market."

Additionally, amid heightened tensions on NATO's eastern flank due to the Russia-Ukraine war, Eastern European currencies generally depreciated. The Thai Baht also depreciated, as the country's export growth hit a nearly one-year low, affected by US tariffs.

In Latin America, Argentina drew attention due to Yellen's remarks. Yellen stated that the US is discussing a $20 billion currency swap agreement with this South American country and is preparing to purchase its dollar-denominated bonds. Following this statement, the Argentine Peso appreciated, and the prices of dollar bonds surged. Argentine authorities subsequently lowered the repurchase rate to curb the Peso's upward momentum At the same time, emerging market stock indices rose by 0.4% on Wednesday. Among them, technology blue chips Alibaba and Tencent, as well as Saudi bank stocks, led the gains. The Saudi stock market recorded its largest increase since 2020 after media reports indicated that Saudi Arabia would relax foreign ownership restrictions.

In the central bank's decisions, the Czech National Bank kept interest rates unchanged for the third consecutive meeting. Previously, policymakers had expressed concerns about the persistent inflation risks